Wilson v. City of Fayetteville

• Decision Date: 02 November 1992
• Docket Number: No. 91-290,91-290
• Citation: 838 S.W.2d 366,310 Ark. 154
• Parties: John Vernon WILSON, Appellant, v. CITY OF FAYETTEVILLE, Arkansas, Appellee.
• Court: Arkansas Supreme Court

Page 366

838 S.W.2d 366

310 Ark. 154

John Vernon WILSON, Appellant, v. CITY OF FAYETTEVILLE, Arkansas, Appellee.

No. 91-290.

Supreme Court of Arkansas.

Nov. 2, 1992.

Roy E. Stanley, Springdale, for appellant.

James N. McCord, Fayetteville, for appellee.

DUDLEY, Justice.

We grant rehearing in this case. The facts are as follows. In 1977, appellee the City of Fayetteville condemned a tract of appellant Wilson's land, took possession of it, and deposited $100.00 into the registry of the trial court as the amount necessary to make compensation. Over eleven years later, in 1988, the condemnation case was heard, and a jury fixed the value of $29,000.00 for the land taken. The trial court entered judgment for the $29,000.00, less the $100.00 deposit, but refused to award pre-judgment interest. The City appealed the amount of the award, and Wilson cross-appealed the trial court's refusal to award pre-judgment interest. The court of appeals, in an unpublished opinion handed down on November 15, 1989, affirmed the award of $29,000.00 on direct appeal, but on cross-appeal reversed the failure to award pre-judgment interest and remanded the case "for a determination of 'a proper rate' of interest from the time of taking until judgment." Upon remand to the circuit court, the City conceded that "post-judgment interest should accrue on the pre-judgment interest award as well as on the jury award," but contended that pre-judgment interest is limited by the Constitution of Arkansas to a rate of six percent. See Ark. Const. art. 19, § 13. The circuit court correctly ruled that the six percent limitation did not limit Wilson's state and federal constitutional rights to recover just compensation. See Arkansas State Highway Comm'n v. Vick, 284 Ark. 372, 682 S.W.2d 731 (1985). However, the circuit court also held that it could not award compound interest. In its letter opinion the trial court wrote:

Some question has also arisen as to whether or not the interest is to be compounded or if it is to be simple interest. In the Vick case, supra, the Supreme Court allowed ten percent simple interest. Therefore, ... they have spoken on the issue and have only allowed simple interest.

The trial court's order recites: "Based upon the holding in Vick, supra, the Court finds that such prejudgment rate of interest should be computed as simple interest without compounding."

Wilson appealed the circuit court's ruling that it could not award compound interest, and the court of appeals certified the case to this court because it involves both a Constitutional issue and a matter of significant public interest. The original majority opinion this court handed down held that the circuit court should have considered awarding compound interest, but did not remand the case for a consideration of such award, 310 Ark. 154, 835 S.W.2d 837. We now remand for such a consideration.

Under the Fifth Amendment and the Due Process Clause, interest is an element of just compensation, and just compensation is for the trier of fact to determine. The Court of Claims in Miller v. United States, 620 F.2d 812, 837, 223 Ct.Cl. 352 (1980) wrote:

"Just compensation" in the Constitutional sense has been held to include interest for the delay in payment from the date of taking to the date of payment. Albrecht v. United States, 329 U.S. 599, 602, 67 S.Ct. 606, 608, 91 L.Ed. 532 (1947); Seaboard Air Line Ry. v. United States, 261 U.S. 299, 43 S.Ct. 354, 67 L.Ed. 664 (1923). Where there has been an appropriation of private property for public use within the meaning of the fifth amendment, "the right to interest or a fair equivalent, attaches itself automatically to the right to an award of damages." Shoshone Tribe v. United States, 299 U.S. 476, 497, 57 S.Ct. 244, 251, 81 L.Ed. 360 (1937). The determination of just compensation, including the proper rate of interest, is basically a question of fact. United States v. 100 Acres of Land, 468 F.2d 1261 (9th Cir.1972), cert. denied, 414 U.S. 822, 864, 94 S.Ct. 119, 137, 38 L.Ed.2d 54, 84 (1973).

See also, Tony Guiffre Distrib. Co. v. Washington Area Transit Auth., 740 F.2d 295 (4th Cir.1984); United States v. 174.12 Acres, 671 F.2d 313 (9th Cir.1982); United States v. Blankenship, 543 F.2d 1272 (9th Cir.1976); and United States v. 100 Acres, 468 F.2d 1261 (9th Cir.1962), cert. denied 414 U.S. 822, 94 S.Ct. 119, 38 L.Ed.2d 54 (1973).

In Arkansas State Highway Commission v. Vick, 284 Ark. 372, 682 S.W.2d 731 (1985), we expressly held that the just compensation due a landowner in a condemnation case could not be limited by state law. In that particular case, the limitation was by a statute, Ark.Code Ann. § 27-67-316(e)(1) (1987), which provides for six percent interest in condemnation cases. We wrote:

The landowners' position in the case at bar is right. As a matter of just compensation and due process under the federal and state constitutions, a landowner cannot be denied interest on the unpaid part of the award during the time he is deprived both of the use of the land and of the money representing its value. Housing Authority of the City of Little Rock v. Rochelle, 249 Ark. 524, 530 S.W.2d 794 (1970); Ark. State Hwy. Comm'n v. Stupenti, 222 Ark. 9, 257 S.W.2d 37 (1953). In Stupenti we quoted from a Supreme Court case holding that the landowner is not limited to the value of the property at the time of the taking; he is also entitled to such an addition as will produce the full equivalent of the value as if paid contemporaneously with the taking. Interest "at a proper rate" was held to be a good measure by which to ascertain the amount to be added. Jacobs v. United States, 290 U.S. 13, 54 S.Ct. 26, 78 L.Ed. 142 (1933). Since a constitutional right is involved, the interest rate to be allowed may exceed that specified by statute. Redevelopment Agency of City of Burbank v. Gilmore, , 198 Cal.Rptr. 304 (Cal.App. 2 Dist.1984); State by Spannaus v. Carney, 309 N.W.2d 775 (Minn.1981); Edwareds [Edwards] v. Ark. Power & Light Co., 638 F.2d 1149 (8th Cir.1982), Arnold J., concurring.

284 Ark. at 375, 682 S.W.2d at 732.

Thus, it is clear that interest is an element of the just compensation required to be paid in condemnation cases, and, under the Fifth Amendment and the Due Process Clause of the United States Constitution, it is to be determined by the trier of fact.

In Seaboard Air Line Ry. v. United States, 261 U.S. 299, 304, 43 S.Ct. 354, 356, 67 L.Ed. 664 (1923), the United States Supreme Court explained that when private property is taken for public use, "[t]he compensation to which the owner is entitled is the full and perfect equivalent of the property taken.... [This] means substantially that the owner shall be put in as good position pecuniarily as he would have been if his property had not been taken. [Citations omitted. Emphasis added.]" The award must be a full and fair reimbursement. Id. at 306, 43 S.Ct. at 357. Another decision suggests acceptance of the principle that constitutionally proper interest must reflect market conditions. In Kirby Forest Indus., Inc. v. United States, 467 U.S. 1, 10-11, 104 S.Ct. 2187, 2194-95, 81 L.Ed.2d 1 (1984), the Court affirmed that interest is compensation for the delay between the taking and payment, necessary to place the landowner "in as good a position pecuniarily as he would have occupied if the payment had coincided with the appropriation. Phelps v. United States, 274 U.S. 341, 344 [47 S.Ct. 611, 612-13, 71 L.Ed. 1083 (1927) ] and Seaboard Air Line R. Co. v. United States, 261 U.S. 299, 306 [43 S.Ct. 354, 357, 67 L.Ed. 664] (1923)." The Court stated that in cases such as the one at bar, where the government obtains title and possession before a final condemnation judgment is rendered, the landowner is constitutionally entitled to interest on any delayed payment "sufficient to ensure" a monetary position as favorable to him as if payment and taking had coincided. Kirby Forest Indus., Inc., 467 U.S. at 10, 104 S.Ct. at 2194 (emphasis supplied). In a footnote, the court explained that this principle of "full and perfect" financial equivalency "underlies several decisions by Courts of Appeals, holding that the six percent rate of interest prescribed by [the federal condemnation statute] is not a ceiling on the amount that can and must be paid by the Government. [Emphasis added.]" Id. at 11 n. 16, 104 S.Ct. at 2194 n. 16 (emphasis supplied).

During the period in which the government has taken possession of the land but has not paid an amount representing its full value, eleven years in this case, the landowner becomes "an involuntary lender to a debtor he would often prefer not to have." Redevelopment Agency of the City of Burbank v. Gilmore, 38 Cal.3d 790, 214 Cal.Rptr. 904, 915, 700 P.2d 794, 806 (1985). The involuntary lender is forced to loan an uncertain amount of principal to an uncertain date of maturity. As this case turned out, the landowner involuntarily loaned the City of Fayetteville $28,900.00 over a period of eleven years. If the interest on that involuntary principal is not compounded, then "as the unpaid interest accumulates, the accumulated interest is the equivalent of an interest-free loan." Borough of Wildwood Crest v. Smith, 235 N.J.Super. 453, 563 A.2d 73, 75 (1988). We have said that the landowner "cannot be denied interest on the unpaid part of the award during the time he is deprived both of the use of the land and of the money representing its value." Arkansas State Highway Comm'n v. Vick, 284 Ark. at 375, 682 S.W.2d at 732. Yet, the landowner might be deprived of interest on the unpaid part of the principal if he were forced to make an interest free loan on the accumulated interest.

Here, the trier of fact should have been allowed to consider that the City of Fayetteville deposited $100.00 which supposedly represented the market value of the land at the time the City...